Market players were anticipating increased volatility Friday, but it turned out that it was President Trump and not Fed Chair Jerome Powell that has created the volatile action.
The market was mostly unconcerned about Powell's speech at Jackson Hole and was trading up mildly on his comments when President Trump first attacked the Fed about its reticence to cut rates more aggressively and then exploded in several tweets in response to the China retaliation this morning.
Trump promised that he will be responding Friday afternoon and told U.S. companies to start looking to move out of China. The response by Trump was so strong that it has raised concerns that the ongoing negotiations will now be terminated.
Stocks fell abruptly on the Trump tweets. Gold moved sharply higher, the dollar has a substantial loss and bonds are trading up again.
While Powell wasn't clearly dovish, he was vague enough to assure market players that the Fed would be cutting rates as conditions changed. Trump, on the other hand, has created much greater uncertainty as he ramps up his response to China.
The market is said to hate uncertainty and we have much more of it now as the China situation spins out of control.
As I mentioned in an earlier post, I've started some index shorts and may look to add further. The S&P 500 is back in the middle of its recent trading range as it struggles as the intraday lows.